Tuesday, August 16, 2011

Wilbur Ross Ross Sees End to Slump in Shipping (FRO; TNK; NAT)

Mr Ross deals in a corner of the business world that, more than most, demands clear thinking. Yesterday he was interviewed on CNBC:

The dramatic rise in oil prices is a bubble, famous turnaround investor Wilbur Ross told CNBC Monday, noting that there is no apparent supply problem with crude.While discussing his investment strategies for the second half of the year, Ross touched on his outlook for commodities.

"Remember when oil went to $70 a barrel in the so-called 'Arab Oil Crisis,' there was a shortage. There were lines at gas stations, talking about rationing. There isn't a line at any gas station gas station anywhere in the world, so there's clearly not a physical shortage," he said....

Acting on his belief, he made the most leveraged bet on lower oil that he could think of, he bought a ratty, low cost Indian airline, Spicejet. India's Economic Times carried the story on July 13.
On July 11 oil had traded at its all-time record high price, $147.27.
On December 21, 2008 oil traded at $33.87.
We have a lot of posts on Mr. Ross, he's worth paying attention to.

Two stories from Bloomberg:

Billionaire Wilbur Ross is betting that the slump in shipping which drove oil-tanker returns to a 14-year low and rates for commodity carriers to the cheapest in a decade is ending.

The 73-year-old, whose New York-based WL Ross & Co. manages about $10 billion in assets, is part of a group spending $900 million on 30 ships hauling gasoline, diesel and other refined products. It is Ross’s first shipping investment and deploying “another few hundred million” in the industry “is certainly easy to do,” he said in interviews on Aug. 5 and Aug. 12.

That outlook contrasts with the pessimism of John Fredriksen, the founder of Frontline Ltd., the biggest operator of the largest crude carriers. The 67-year-old billionaire said in May it would probably be another year or two before ship values collapse and he can start adding to his fleet.

“The history of the industry is one that goes from immense prosperity to immense poverty and back again, and we think that’s going to continue,” Ross said by telephone. “We’re not necessarily at the exact bottom of the cycle, but we think we are relatively close to it.”

Demand for shipping will strengthen because new refineries are being built in China and India, increasing the distance that vessels have to travel to deliver crude and pick up refined-oil products, Ross said. That will compensate for a “lackluster” U.S. economy, Europe “in much the same condition” and “very modest” growth in Japan, he said.

“We do see growth in the emerging countries, but probably at a little lower rate than it had been,” Ross said. “China maybe grows at 7 or 8 percent instead of nine plus.”...MORE